The cost of life insurance coverage for an individual will vary widely according to a number of different factors.

Among the many factors affecting the cost of coverage are the amount of the death benefit, the age and health status of the insured, the term of the policy and any investment component.

As with any financial purchase the key to getting the best coverage at the best price is to shop around as much as possible.

How do life insurance companies determine premiums?

While each company offering life insurance coverage will have a different formula for determining monthly premiums, in the end it all boils down to the actuarial tables.

Actuaries are specialized professionals who use a variety of statistics to determine the likelihood that policyholders will die during the life insurance term. Crunching these numbers allows life insurance companies to rank the risk of applicants and determine the proper premium levels.

See also: What is a health classification?

Yes, it is possible for a person to own more than one life insurance policy. In some cases, multiple policies are obtained in order to reach what is determined to be the optimum level of coverage.

Some people have a small life insurance policy provided by their employer, some employers offer basic life insurance policies for their employees. Even though this coverage is better than nothing, in some cases it may be inadequate to replace lost income.

In some cases company provided life insurance coverage provides a percentage of the worker’s annual income, often between 50% and 200% of base salary.

In the event of the worker’s death, this small death benefit would likely be exhausted quickly. Therefore, it may be determined that it is a good idea to supplement that basic coverage with additional life insurance.

This type of basic coverage can be supplemented with an additional life insurance policy, either through the employee’s job or through a third party life insurance company.

For this reason many life insurance companies require a medical exam to prove good health before writing a policy. Even so, people who do not wish to undergo a health examination may have an option.

A “no exam” life insurance policy provides coverage without a required health exam. Although the premiums are often higher than coverage with a medical exam, some people do prefer this type of coverage.

Research all options thoroughly before deciding what type of life insurance policy is right for you. Do the benefits of a “no exam” policy outweigh the downfalls?

See also: What is a life insurance medical exam?

Life insurance helps to protect people from risk, but that risk cuts both ways.

In order to determine the most appropriate level of premiums insurance companies employ a number of methods, including health assessments, to evaluate each applicant for life insurance.

A life insurance medical exam is used to determine the member’s current level of health so that the premiums can be determined and the risk assessed properly.

Some life insurance companies require medical exams for all policies, while others may also offer no exam life insurance policies. Be sure to research your options thoroughly before deciding on a company and policy.

See also: What is a health classification?

Many people ask why they should purchase life insurance, or how they know if they need life insurance coverage at all.

While there are some people who may not need life insurance, any individual with a family to support should at least consider purchasing coverage. If you have people who rely on you, then you may need life insurance to protect them in the event of your death.

The purpose of life insurance is to provide a source of income to your survivors in the event of your untimely demise.

The proceeds from a list insurance policy can be used for any number of purposes, including paying off the mortgage on the family home, sending the kids to college and replacing lost income. Most of all life insurance provides financial security to those family members left behind.

In order to provide the most accurate premium quotes, life insurance companies need to have a way to predict the future health of those they insure. This type of calculation can be quite complicated, but in the end it means assigning life insurance applicants to one of several health classifications.

The best health classification – and the least expensive to insure – is known as preferred plus. After that comes preferred, standard plus and standard. The premiums for coverage are determined in part by these health classifications, and it is important for life insurance shoppers to understand these terms.

The health classifications used by life insurance companies are used to determine the relative level of risk – as the risk increases the life insurance rates typically go up as well.

Preferred plus health classification

Anyone who is in the market for life insurance should hope to be classified as preferred plus. That is because preferred plus is the top health classification used by life insurance companies – and it generally provides the lowest insurance premiums.

Unfortunately this highly sought-after health classification applies only to a small percentage of life insurance applicants, so most shoppers will end up with a lower health classification – and higher premiums.

Preferred health classification

Those insurance shoppers who do not qualify for the preferred plus health classification may still qualify for preferred coverage. While not as good as preferred plus, the preferred health classification is still better than standard or standard plus.

Since these health classifications are used to determine insurance premiums, getting qualified as preferred can result in significant savings.

Regular or standard health classification

While a small percentage of life insurance applicants will qualify for preferred or preferred plus coverage, most will be classified as regular or standard risks. This average classification will typically mean premiums that are higher than those afforded preferred plus or preferred health classifications.

For many people, the main goal of life insurance is to provide a death benefit to their beneficiaries. But life insurance can be used for other purposes as well.

In fact, life insurance can serve as an investment, with a cash value that can be accessed even while the policyholder is still alive.

Variable life insurance policies provide this type of investment vehicle, and policyholders can invest in a combination of stocks, bonds and other investments. This can allow the investment to grow over time and provide an excellent cash benefit down the road.

Don’t let your life insurance policy lapse

Life insurance provides important protection for workers and their families, but that protection is only in force when the policy is active.

Allowing a life insurance policy to lapse is dangerous, and it is important to keep up with the required premium payments.

In some cases the life insurance company will provide some sort of grace period, but it is important for policyholders to ask about that grace period when purchasing the policy.

Some insurers will provide a 60 to 90 day grace period, but after that grace period has expired the insurance policy will generally lapse and new coverage must be purchased.

Recovery of funds may be possible with whole life insurance

Even though life insurance is an important purchase and provides much needed coverage, many people are reluctant to make the buy.

Sometimes they worry about the loss of premiums if the term expires, and they may wonder if there is any value beyond the death benefit.

In the case of whole life insurance the answer may well be yes, and it is important for policyholders to check on the cash value of their policy from time to time. This will allow workers to know how much they can recover if they cancel the policy.

Whole life insurance can provide a cash value

While term life insurance provides only a death benefit, whole life also provides a cash value for policyholders.

The exact amount of the cash benefit will vary according to the value of the underlying policy and the nature of the investments, but in most cases the cash value will be only a portion of the death benefit.

Current policyholders can contact their insurance representatives to determine their cash value, while prospective clients can ask their insurance salesperson about the potential cash value of any policy under consideration.